Times are good for California agriculture

Vernon Crowder, Rabobank senior vice president and agricultural economist, does not miss much.

“Where’s that pretty girl who was with you last year?” Crowder asked with a big smile and a larger chuckle. Crowder’s greeting during the recent World Ag Expo was at the bank’s booth where he holds agricultural economic court each year.

He never disappoints and always amazes. He answers all questions forcefully. His words are dynamic. Crowder is one of the best known ag bankers in California. He is recognized not only for his economic prowess, but for his constant companion, a German Shepherd guide dog. Crowder, who lives in Fresno, Calif., is totally blind, yet he travels the state with his dog and occasional two-legged assistant.

Interviewing Crowder is always a treat. He looks you straight in the face, focusing on the source of the voice. He’s quick with a handshake or a pat on the forearm or shoulder to make a point.

After the interview, it was difficult to forget Crowder’s comment about “no pretty girl.” Is he totally blind or not? To find out, an apologetic email followed. This is his reply for those who also may have wondered about Crowder’s disability.

“No problem! I cannot see anything. My eyes, in fact, are prosthesis. I went blind just before I became a teenager. Everything that was a problem with my eyes then could be fixed with today’s medical technology, if caught soon enough.

“Please do not hesitate to ask questions. It is better than making the wrong assumption. Despite some problems, life has been and will still be good for me!”

Now to the subject at hand; the status of California’s agricultural economy.

Western Farm Press covered many subjects with Crowder, starting with the overall state of the agricultural economy.

Farmers and suppliers tell Farm Press the past five years have been good economically to the point of being very good. Agree or disagree?

You are absolutely right. It has been very good for most, with a few exceptions. The drought a few years back is one. It was tough last year on a few people with weather issues like hail. However, it also made prices good for other people. Even though we have been through a bad recession in this country, the growth of the global economy has been good. This has increased the demand for what people want to consume like nuts, citrus and wine. This has benefitted California agriculture. Asia is a huge market for California products. Yes, the economy there is slowing. However, it is still growing at 7 percent to 8 percent, more than double the global average. That is still strong for what California farmers sell into Asia.

Economic collapse?

This robust economy has dramatically driven up land prices. We hear prices of $15,000 per acre and higher for open ground. Is agriculture setting up for an economic collapse like the 1980s?

Land values are very, very strong in California ... maybe not as strong as the Midwest, though. The demand here is for land suitable for permanent crops. Farmers who have done well over the past four or five years are buying the land for permanent crops. That is a lot different than the 80s when farmers borrowed heavily to buy land — as much as 100 percent equity — and there were many, many non-agriculture speculators buying land. Today there are investors chasing land, but more often than not it is farmers who are beating them out. Yes, there are long-term investors in the market, but there are not many. Farmers have enough cash right now that bankers have no problem making conventional, conservative advances. The leverage is very low right now. This is healthy for the industry. That does not mean there will be no adjustment in the future, but it will not be the crash we saw in the 1980s.

Not all agricultural segments are doing well, particularly the dairy industry. What is your take on it and other livestock operations?

The high cost of feed is making it rough on people in the animal feeding business, especially dairymen. The dairy industry is at a point where it needs to make some investments in expanding markets, especially in exporting milk, to increase sales. The industry needs to build relationships abroad for consistent pricing. In the past, the dairy industry has relied on cheap feed for profit. You do not have that any more. The industry needs to market its product better. The industry is beyond government help. There has been a lot of consolidation in the past five years, and there probably will be more. The industry will grow if dairymen work more with the processors to develop better marketing.

One ag industry that suffered during the recession was grapes. Wine grape prices are back up. The same is true for the raisin and table grape producers. Thoughts on California grapes?

Wine grapes have benefitted from the improving global economy, and domestically people are again buying wine. It is not in the same price range as it was before the recession. I see improvements in wine inventories and people are planting wine grapes again. The wine grape issue we are looking at is can we meet the growing demand? When the dollar was not doing well, imported wine from Chile and Australia came in. That product is not so competitive any more. Wineries are looking for domestic production once again. However, I do not see a big expansion because it is so expensive to plant a new vineyard. There is no doubt speculative planting, likely in the coastal areas, without a winery contract. However, as a banker, I like to see people who do that well-healed or at least some sort of a winery contract. Raisin demand and supply are back in balance, which is a long way from where it was seven or eight years ago when raisin grape vineyard values were down to the ground value.

Tree nut horizon, water trouble

There are probably no crops more profitable now than almonds, walnuts and pistachios. All continue to be planted throughout the state. What is your outlook for those crops?

Almond prices have been historically volatile. They can go from $3.50 to $4 pound to the grower to 90 cents ... but we have not seen 90 cents in a long time. Prices are high right now and if prices get too high you could see price rationing. The thing with almonds is that orchards only last 20 years so you can make adjustments in the supply side relatively rapidly. However, $1.75 almonds are still profitable, and prices are a long way from that right now. The Chinese market is the key component in the success of these nut crops. There is always the chance China can begin producing their own nut crops. However, it is almost impossible to produce almonds in China. It is tough to grow pistachios. Walnuts are a big crop there, but they are planted mostly to prevent land erosion. They would have to change the way they cultivated walnuts and process them to be competitive with California walnuts. That could take a long time.

The citrus industry is another healthy segment. What do you see regarding its future?

The easy peel Mandarins are really hot right now. There is a concern that as more of the peeled Mandarins come into the market, Navels could suffer. I have not seen that yet. A good navel is still a nice product.

Any discussion about California agriculture has to center on water and its availability and cost. (When Farm Press interviewed Crowder, many were projecting a 30 percent to 40 percent allocation this season. That dwindled to just 20 percent in the spring.)

The water issue has grown more critical as we plant more permanent crops. Also, vegetables and processing tomatoes act like permanent crops when it comes to water. Farmers are much more reliant on water than they were just a few years ago.

It is harder and harder to make adjustments if they do not get deliveries. Unfortunately, even if we get all the dams needed and get a new Delta conveyance system, it will be 20 years or more before we get any new water. Therefore, for the next year or the next 20 we need to focus on groundwater monitoring and banking. Not all groundwater is managed and monitored properly today. We need to be making better water decisions. Groundwater banking is still small in comparison to what we need to support agriculture. Farmers need to know if they create groundwater banks, will it be available to them in 20 years. Water availability will become an even more important financial element for bankers in the future.